Featured Health Business Daily Story, Aug. 13, 2012
Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.
In what could be one of the largest shifts of an employer’s retiree medical plan to Medicare Advantage, Aetna Inc. said July 17 it obtained a contract to convert its current administrative-services-only (ASO) plan for the Teacher Retirement System of Texas (TRS) to MA effective Jan. 1, 2013. The change for the 75-year-old retirement system, an Aetna client for more than 25 years, affects more than 226,000 retired public school employees and dependents who may move to an MA PPO with an extended service area (ESA).
While TRS is not the first large state teacher retirement plan to move to MA, notes consultant Jean LeMasurier, senior vice president, public policy at Gorman Health Group, LLC, it may be another indicator that employers finally are beginning to step up the pace in long-awaited moves of retirees to both MA and stand-alone Medicare Prescription Drug Plans (MAN 5/24/12, p. 1). Changing to an MA PPO rather than an HMO, LeMasurier says, is an “easier shift” for a retiree plan such as TRS that is accustomed to provider choice.
The TRS MA plan, according to materials distributed to plan members and obtained by MAN, provides for automatic enrollment of current beneficiaries in the ASO plan but does allow those beneficiaries to opt out. However, those who do opt out will have a plan year ending next Aug. 31, meaning they will have a shorter period to meet deductible and coinsurance requirements before incurring new annual deductible and coinsurance obligations.
The materials describing the changes, including an article in the TRS member newsletter, tout “richer benefits, including lower deductibles, and lower premiums.” They explain that TRS members in an MA plan may visit providers in or out of the plan’s large network without incurring larger cost sharing as long as the providers are willing and eligible to accept the plan. “Historically, more than 90% of retiree medical services provided to TRS-Care participants were from providers who have accepted Aetna’s Medicare Advantage plans,” the brochure for TRS members adds.
The conversion of current eligible TRS commercial ASO beneficiaries to the new MA product “could yield over $800 million of additional Medicare premiums in 2013, subject to the number of members that convert,” Rick Frommeyer, head of group Medicare at Aetna, tells MAN. That figure, Chairman and CEO Mark Bertolini said in Aetna’s July 31 second-quarter earnings call with investors, is based on converting 60,000 to 70,000 of the beneficiaries to MA, but the insurer would not forecast how many beneficiaries actually will convert.
The move of employer retirees into MA plans, says Frommeyer, “is a trend we have seen already in recent years in the commercial Medicare space. In addition, there’s a growing opportunity in state and municipal governments to address their unfunded retiree health obligations, which are estimated to be $600 billion and severely stressing state budgets.”
Asked about the oft-mentioned hesitance of employers to pull the trigger and make the long-contemplated moves to MA, Frommeyer replies, “We did see a fair amount of inertia among large employers this year, as many wanted to learn more about the Supreme Court decision on health care reform before making significant benefit changes. For large employers, the ruling came too late in the year to influence their 2013 benefits, so many chose to defer any strategic benefit changes for another year.”
Despite this, he continues, “in the public sector, states, counties, cities and other municipalities are taking a fresh look at their retiree obligations in light of significant budget shortfalls. Taft-Hartley plans and labor unions face similar challenges. They have multi-year, collectively bargained agreements in place that preclude rapid changes….We are actively involved now with a number of states as well as smaller municipalities and labor organizations that are trying to develop better solutions for their retirees. Medicare Advantage is proving to be a valuable solution for these employers.”
There are other factors at work too, suggests LeMasurier, who heads the employer practice at Gorman. She tells MAN that many public retiree systems can no longer afford their promised medical benefits and that Government Accounting Standards Board accounting guidelines furnish incentives for them to shift risk. Among state teacher retirement systems, she says, Michigan, Pennsylvania and West Virginia made earlier moves to MA, although Michigan switched back from its MA private-fee-for-service plan after the 2008 Medicare law resulted in the exit of many PFFS plans.
There are additional incentives for these public retirement plans to shift now, LeMasurier contends, since Medicare Part D coverage has improved through the partial filling in of the “doughnut hole” gap as a result of the 2010 health reform law. While the end of the tax deductibility of the Medicare Retiree Drug Subsidy for employers in 2013 is another reason some retiree plans may shift to MA, it is less of a factor for the teacher retiree plans since they generally are not-for-profit entities, she adds.
Speaking of the overall trend of employer moves to MA, she says, “It’s been a very slow shift over the years.”
Humana Inc. benefited in 2010 from a move of several state retiree populations into managed care, recalls securities analyst Carl McDonald of Citigroup Global Markets in a July 20 research note. In 2011, however, he added, “many employers were preoccupied with figuring out the impact health reform legislation would have on their active populations, and weren’t really focused on making significant changes to the retiree benefit structure. Humana noted earlier in the year [i.e., 2012] that group retiree interest has picked up quite a bit, while United[Health Group] is projecting an uptick in enrollment growth due to the group retiree segment.”
© 2012 by Atlantic Information Services, Inc. All Rights Reserved.
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